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Sunday, May 13, 2012

A ton of JPM chatter

Obviously the JPM chatter has exploded. Everyone is dishing out their opinions, and trying to assess the scenario. What I find most interesting about the chatter is that many are highlighting this as "the tip of the iceberg", then in the same breath saying it "could be a one-off".

3. CIO group saw profit from 2009-2011, but generally they don't. (As a hedging vehicle this is an obvious expectation as this time period was the start of the credit bubble bursting.)

4. CIO assets significantly grew after 2009. (Again, this is obvious because JPM absorbed two massive organizations, Bear Sterns and WaMu. The organization had to adjust to the new assets.)

Aside from assumption, from an actual data perspective, JPM (as per the CC) will lose $800M to potentially $3billion from their CIO group. This represents 0.05% to 1.9% of total tier 1 capital. (All I care about is tier 1 capital because this measures a banks viability.)

From a asset perspective, the numbers speak for themselves.

From a risk management perspective, much of the chatter was harping on how 'late' JPM was to acknowledge the issue. JPM took about 30days to reveal the information they had to investors. While I would love absolute real time red flags, within a 30 day period, JPM noticed red flags, highlighted the main issue and revealed it to shareholders. As an outsider looking in (and from someone who has direct and extensive experience investigating regulatory issues and deviations within an uber regulatory environment, then reporting on the issues), the timeline is not extreme.

Make no mistake, the current situation sucks. But JPM is a low leveraged, highly capitalized bank with their CIO group having a history of doing what they were suppose to be doing. To say this issue is anything other than a classic fuck up, is kinda disingenuous.

JPM maybe dead money until this situation is better clarified, but I will wait. Not looking to sell into this negativity.